The Dollar Is About to Lose Big

Eurozone inflation in November revealed the first monthly deceleration since June last year. Meantime, harmonized consumer prices increased by just 10% last month. The numbers corresponded with expectations for an expansion of 10.4% in November versus October’s final reading of 10.6%.

It is still better than five times the European Central Bank’s target rate. But after almost two years of near-relentless acceleration in inflation, markets could accommodate any sign that the worst may be over.

After inflation in Spain and several major German states chilled, European assets got a rush on Tuesday.

The euro was last higher by 0.4% at $1.0366, lifting off a one-week low earlier on Wednesday at $1.0319. Against the sterling, it dropped 0.1% to 86.30 pence.

The U.S. dollar index gauges the dollar’s performance versus six major currencies. It dropped 0.37% to 106.48, down from an overnight high of 106.90.

Inflation Is Peaking

It lost about 4.3% in November, marking its most destructive monthly performance after September 2010, as stated by Refinitiv data.

Investors have ratcheted their stakes that inflation has peaked, and the Fed will soon signal a change to a softer viewpoint on monetary policy, not least as the world tips into a likely recession next year.

Powell will give a speech to the Brookings Institution in Washington at 1830 GMT on the economic perspective and the labor market. Meanwhile, private-sector employment data for November is expected at 1315 GMT.

Markets indicate investors are connecting a probability of 63.5% odds that the Fed will raise interest rates by just half a point on Dec. 14 and a 36.5% chance of another 75 basis point hike.